Innovation and Intellectual Property Rights: The Case of Soybean Seeds in Argentina and the United States

Do Iprs Foster Innovation?

The question of whether IPRs can foster innovation and investment in R&D has generated a broad controversy in economics. The literature has justified the use of IPRs because of the existence of market failures preventing appropriability of quasi-rents from innovation. In this view, competitive markets are not able to provide sufficient incentives to firms leading to underinvestment in R&D (Arrow, 1962). Based on these ideas, standard economic theory holds that the introduction of IPRs would solve the market failure providing the proper incentives for firms to allocate their resources to R&D (Barro & Sala-i Martin, 1995). Consequently, IP protection is assumed to be positively related with innovation.

Several scholars have theoretically criticized the monotonic increasing relationship between IPRs and the propensity to innovate, arguing that innovation is determined by a set of factors and that the effect of IPRs is highly sector and technology specific (Dosi et al., 2006; Odagiri et al., 2010). As well, Boldrin and Levine (2010) argue that innovators can be well protected in the absence of IPRs by other means. They claim that IP protection is not a cause of innovation but rather a consequence. Firms aim to hold IPRs because they confer a monopoly power, which may be beneficial for them but can be costly for society.